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Savvy savings - The ISA way

Last updated at 13:08, Tuesday, 11 February 2014

Advertising feature. Introduced to the UK back in 1999, ISAs have gone on to become a popular product for those looking to make the most of their savings by increasing the tax efficiency of their stored funds. Also known as individual savings accounts, they have gone on to be adopted consumers from all walks of life and have recently gone through some changes that may make them an even more attractive option.

The government brought in the ISA as a replacement for personal equity plans, known to many as PEPs, and tax-exempt special savings accounts, which were often referred to as TESSAs. Since then, research looking at how many have been adopted up until the end of 2009 shows there are now more than 19 million ISA accounts that have been opened across the Britain - suggesting they are now a mainstream solution for savers.

Of course, although there are all types of people now enjoying these facilities, with so many to choose from, which should you consider? Well, whether you choose to go for a fixed rate ISA or a variable option, there are some common misconceptions you might first want to know about - one being that all ISAs are designed for long-term investment. Although it is true leaving funds in an ISA for a long period might be the best approach, they can also be a great shorter-term savings facility.

There are all kinds of money saving tips you will need to think about if you are to get the most from such a product and ensuring you get the best ISA rate should be at the forefront of your mind. First of all though, you'll need to know some of the differences that separate different types of ISA. Initially, you will have a number of choices available to you. If you decide on the cash option, you will effectively be getting a high interest savings account able to operate on a tax-efficient basis. Stocks and shares ISAs, on the other hand, use investments, properties or bonds selected by your provider to make your money work harder.

When it comes to putting funds into either of these, however, the rules are quite different. Both have a certain limit on how much they can be credited by over the tax year. For cash ISAs this figure is £5,100 for all savers from April 2010, but this date also brings with it a £10,200 allowance for stocks and shares. There is also the option to spread your funds over both types of ISA, but the total should not exceed the latter figure. These limits have been in effect for savers over the age of 50 since October 6th, but will be rolled out to everyone this new tax year.

Commenting on the decision to alter the allowances for ISAs in the UK, Chancellor Alistair Darling said: "I'm determined to help savers, because while low interest rates have helped millions of homeowners, I also know that they have hit those who rely on their savings to get by. This is why I am increasing the ISA allowance for all over-50s by £3,000 to £10,200 and from April next year for all savers." A recent study from Virgin Money recently suggested the over 50s were really making the most of the new limits, with lump sums having generally doubled since the changes were made. Company spokesman Grant Bather said the figures showed the decision had been a hit, adding that people of all ages should now take full advantage of it.

Halifax has a range of products available like the ISA Direct Reward which benefits not only from having one of the best interest rates around, but also allows you to withdraw up to four times - meaning it can be used should a financial emergency occur. Unlimited deposits mean you have ample opportunity to use you full allowance and 24/7 online and telephone access means you can keep a close eye on it. If you want to switch your ISA over to us from an existing provider, you will also find the process is fast and hassle-free, plus our online savings interest calculator might help you figure out exactly what you can put in - as well as what you might get back.

Although it may seem as if finding the best ISA deal is a bit of a minefield, knowing exactly what you want from them means this doesn't have to be the case. If you are a long-term investor, you might go for fixed-rate ISAs, as putting money away for a greater time might ensure you get the most from them. However, a variable rate option might also be of interest. Obviously rates go up as well as down, but ISA holders may find that as the economy strengthens their package starts to work much harder for them.

Halifax offers a complete range of bank accounts and personal investment products. Whatever you're looking for: from savings to personal loans, a mortgage or a credit card, at Halifax we aim to give you a little extra help. We even offer help with your home insurance and travel insurance too.